August 2015

08/11/2015

Most of us never look twice at the fine print of the frequent flier rewards program’s terms and conditions. The type is so small and there’s so much of it … but if you did, you’d probably see language stating that any accumulated points are not transferrable on death. Some heirs have found that having the right documents and asking nicely can lead to an unexpected result.

If you fly the same route frequently, it pays to use the same airline and sign up for the airline’s rewards program. The accrued points can lead to great deals, reduce your airfare costs and for the real road warrior, generate enough rewards for free trips. There’s real value in these kinds of programs for the frequent flier.

Nevertheless, not everyone uses his or her accumulated point balance before passing away. Since the accumulated points do have a real market value, the question then becomes whether or not they are part of a decedent's estate.

The answer to that turns out to be no, unless an airline decides to make an exception.

It turns out that while most rewards programs have an official written policy that points are not transferrable on death, in reality most airlines will make exceptions to that policy on a case-by-case basis.

If the points are bequeathed to someone, most airlines are willing to transfer the points upon receiving proof of death and proof that the person asking is the appropriate beneficiary.

This practice is totally discretionary, however, and the real key to getting the rewards transferred appears to be to ask nicely.

Airline employees are not required to transfer the points, but if the beneficiary is nice they normally will.

08/07/2015

It is not unusual for wealthy parents to guide their children in their life choices while they are alive, and it’s also not unusual to control how heirs spend their inheritances. But using an inheritance as an incentive to reach specific benchmarks is a new one on us – and perhaps typical of the type of personality it takes to amass great wealth.

When New York real estate tycoon Maurice Laboz passed away, he left behind an estate worth approximately $35 million dollars, two daughters, 21 and 17, and an unusual estate plan.

As is often the case, Laboz did not leave all of that money to his daughters right away. Instead, they must wait until they are 35 years old to receive their inheritances.

However, what is somewhat unusual is that Laboz left ways for his daughters to get some of the money early if they will do things he approves of. For example, they can receive early payments if they get married, only having children in wedlock, and graduate from an accredited university.

These types of pre-conditions to receiving an early inheritance are not normally encouraged by estate planners. One potential issue is that they might have a tendency to make heirs resentful.

By and large, people do not like being told how they should live their lives and do not like feeling manipulated when it comes to things like getting married and having children.

Thus, while the conditions Laboz set might not seem like anything particularly harmful, their mere existence could have unintended consequences. In this particular case, these conditions might become moot.

Laboz was in the process of divorcing his wife when he passed away. The divorce was not finalized and he cut her completely out of the will. She is likely to challenge it.

An experienced estate planning attorney can advise you on the benefits and detriments to “incentivizing” an estate plan.

08/05/2015

A trust that rewards heirs for desired behavior is known as an “incentive trust.” These kinds of trusts are popular among those who fear that their beneficiaries will not treat their inheritances with respect and are likely to waste vast amounts of resources. If you are considering setting up an incentive trust that will succeed, it needs to be done correctly.

Some wealthy families worry that their heirs may not be capable of handling large inheritances, and are concerned that the money may be squandered. In an effort to guide their heirs, they turn to incentive trusts to reward heirs who follow in what they consider to be the correct path.

For example, if you are creating a trust for a minor child, you might want to create a trust that rewards the child for graduating from college or getting a job.

Not all incentive trusts are created equally, however, and it is important to set one up properly or it is likely to fail.

Decide whether you want to create specific things for beneficiaries to perform to receive distributions or if you want to leave everything up to the discretion of the trustee.

Determine whether payments should be made directly to the beneficiary or to a third party. For example, if the trust is to provide money for school, should the trustee distribute that money to the school in the form of tuition or give it to the beneficiary to pay the school?

Decide how long the trust should exist. You can keep the trust in place for the beneficiary's entire life or you can set the trust to terminate at a certain point.

Decide what will happen to the trust assets if the beneficiary does not live up to expectations.

Make sure that all key conditions are spelled out in the trust.

It is important to note that some courts will not enforce incentive trusts that point to actions that are against public policy, such as requiring a person to marry a person of a certain race or religion.

Make sure to consult with an attorney about what types of conditions you can make.

08/04/2015

Wealthy mining magnate Harry Magnuson thought that his estate plan was all settled, and it was, while he was alive. But his wife did not follow the plan he had created, and as a result, one of the Magnuson children is now suing his siblings over an inheritance.

When Harry Magnuson and his wife Colleen had their estate plan created in 2002, the structure was relatively straight-forward: if Harry died first, everything would be left to the surviving spouse. When Colleen died, the entire estate was to be divided equally among the couple’s five children.

Harry passed away in 2009 and Colleen received everything as planned. However, when she passed away, everything was not divided equally between all of the children.

Colleen had signed a new will in 2011 that revoked the 2002 will and disinherited her son Thomas, while the remaining four children inherited everything. Thomas was not amused.

Apparently the new will was prepared by a notary working in the law office of one of the other Magnuson siblings. This has predictably led to problems.

Thomas Magnuson is suing his siblings claiming that they conspired to unduly influence their mother to have him cut out of the will. The Spokesman-Review reported this story in a recent article titled "Magnuson son sues siblings."

It is too soon to know what will happen in this case. This is yet another example of what happens when there is a lot of money at stake and a family member does not think that he or she was treated fairly in an estate plan.

Even if the other four siblings are found to have not unduly influenced their mother to rewrite her will, this case will likely cost the family a lot of money and hurt feelings.

If you really want to disinherit one of your descendants, be sure to contact an experienced estate planning attorney.